With government imposing lockdowns because of rising Covid-19 cases forcing shutting down of stores and services in the largest city of Australia which was partly responsible for a plunge in retail sales in the country in July.
According to analysts, this result shows that the spread of the Delta variant of coronavirus is likely to case Australian economy to contract sharply this quarter.
There was a 2.7 per cent month on month drop in retail sales in July to A$29.8 billion ($21.55 billion), according to figures from the Australian Bureau of Statistics published on Friday. Travel restrictions had imposed resulted in a 1.8 per cent drop in June. The July decline was the largest so far this year and was more than market expectations of 2.3 per cent decline.
The retail sector of the country, which is valued at A$360 billion, comprises around 18 per cent of the gross domestic product of economy and analysts expected further decline in August as Melbourne and Canberra remain in lockdowns.
There was an almost 9 per cent decline in retail sales in New South Wales state while a similar drop is being predicted for August for Victoria.
Analysts have also forecast shrinking in economic output in the current quarter because of the severe hit to consumption, employment and hours worked even as the quarter had been a remarkably strong rebound from last year’s pandemic-driven downturn.
“We estimate that 550,000 workers have been stood down because of the lockdowns,” said CBA’s head of Australian economics Gareth Aird.
“We have downwardly revised our Q3 GDP estimate to look for a contraction of 4.25%, from -2.75% previously.”
A recession could even be triggered by it even though there is optimism that the recent rapid pickup in vaccinations will allow affected cities of the country to open up during the fourth quarter which could be enough to avoid a recession.
Following a slow beginning, there has been a significant pick up in the vaccination pace and currently an average of 260,000 people a day was vaccinated last week. A little more than 32 per cent of the adult population is now fully vaccinated, while 55 per cent have received at least one dose.
Plans for starting to open up the economy have been drawn up by the conservative government of Prime Minister Scott Morrison as soon as 70 per cent of the adults in the country get vaccinated. In order to completely avoid lockdowns, the government has set a target of vaccination of 80 per cent of the total adult population.
A speedy recovery of consumer consumption once restrictions eases is being depended upon by the Reserve Bank of Australia (RBA) and this has prompted the central bank to push ahead with plans to tone down its bond buying campaign despite the latest lockdowns.
But the central bank has come under pressure of delaying the taper at its next policy meeting on September 7 with Sydney and Melbourne now expected to remain shut for far longer than was thought initially.
(Adapted from FlipBoard.com)